Tuesday, February 18, 2014

Wells Coming Off Confidential List Wednesday, The Williston Basin, North Dakota, USA

  • 23736, drl, BR, Bryce 41-5TFH,Westberg, no production data,
  • 24902, 1,949, KOG, Smokey 3-17-20-14H, Pembroke, t1/14; cum --
  • 25761, 1,810, MRO, Kathryn Kukla 14-34H, Murphy Creek, t12/13; cum 7K 12/13;

Active rigs:

Active Rigs18618219917161

RBN Energycondensate splitters along the Gulf Coast; not much of a market for naphtha except perhaps as export.

 The Los Angeles Times

The response to this op-ed from one individual: things change, get over it. The op-ed: the "Tonight Show" is gone; OXY is going. LA needs a new game plan. I was unaware of this:
Websense left San Diego two weeks ago and took their 600 jobs to - are your ready?- Texas.  
Also two week ago Charles Scwab moved their entire financial company from San Francisco to Colorado. Even those in Bay Area are alarmed by Scwab moving. Whenever you mention to some that California is losing high-paying jobs by the thousands every month they say "but we have Google, Apple and Facebook." 
But what they don't realise is that those companies are not expanding here, they are bullding and hiring in Texas, Florida, New Mexico and Nevada.  According to the WSJ, California was #1 in poverty rates and #50 in small business start-ups in 2013.  We are quickly becoming a state of protected illegal peasants and low-wage jobs.  
Our governor?  Clueless.
Later this year Virgin will be testing space flight for regular people in New Mexico.  The company that developed the rockets and business plan did it in eastern Kern County in the Mojave desert.  They were hoping to blast off from there, but moved to New Mexico when California regulators made it impossible to remain.  Virgin has already hired 300 people. 
The Wall Street Journal

Inside Target, CEO struggles to contain giant cybertheft.  
Inside Target, Executives settled around a square table inside a Target Corp. conference room here earlier this month and munched on store-brand snacks as they chewed over something far less appetizing.
Opinion surveys commissioned by the company found that the massive cybertheft that waylaid Target late last year had knocked confidence and trust in the 51-year-old retailer to an all-time low.
Some of the executives were frustrated. Target was having trouble shaking the fallout from a key decision by the CEO that made the crisis appear even worse than it already was. The initial evidence had indicated that credit and debit card numbers of about 40 million Target customers had been stolen.
But the retailer had learned later that hackers gained access to partial names and physical or email addresses for as many as 70 million people—a breach that some top executives counseled against disclosing because it was unclear what kind of fraud danger it posed.
Nevertheless, Mr. Steinhafel insisted on making the bigger number public, sparking news reports that as many as 110 million Target customers had been affected. At the meeting, Chief Marketing Officer Jeffrey Jones groused about the huge number. The public "keeps hearing that equals one third of all Americans," he said. "That's hammering us." Mr. Steinhafel says he has no regrets about the aggressive disclosure and other costly decisions in the wake of the crisis. "Target won't be defined by the breach, but how we handle the breach," he says.
The phrase in bold above might explain why we have learned in dribs and drabs from Target what happened. At first they denied private information was taken, and then admitted that private information had been taken. And it only got worse. Later we learned that the CEO made the decision ten years not to go to chip technology (too expensive). Had Target taken the lead in chip technology ten years ago, it would have set the entire US retail market on a better security trajectory. And just this past week there were reports that federal agencies (FBI?) warned Target that it was, indeed, a Target.

The numbers were bad enough but it was the way Target handled the problem at the outset that was the problem, at least for us. I won't go through that again. Suffice it to say, my wife and I minimize our visits to Target, which used to be our favorite retailer, and never, never use a credit card there. The good news: we're spending less money each month. 


Raising the minimum wage will result in fewer jobs; more poverty. That's the CBO analysis. The White House disagrees. I don't have a dog in this fight, but it's an interesting debate. For investors, at the end of the day, the minimum wage, like flaring in the Bakken, is a red herring. Employers will adjust. The most interesting argument that seems to be missing when discussing the minimum wage is the effect of ObamaCare. ObamaCare gave employers the green light to cost-shift their employees and retirees to private insurance and off the corporate healthcare program. That's worth ten times -- maybe more -- whatever becomes of the minimum wage. All I know is that raising the minimum wage will result in McDonald's putting in self-ordering kiosks which will result in the need for fewer employees. If one can order health insurance off the web, or check in at the airport at a kiosk, surely one can order a hamburger, French fries, and a Coke off a stand-alone Surface or iPad.


The next big debate: student debt
The nation's sharp rise in student debt is being driven largely by Americans with poor credit.
Overall student debt rose 12% to $1.08 trillion in 2013, the Federal Reserve Bank of New York said in a report released Tuesday.
Student debt is the second-largest form of household credit, after mortgages.
Student debt has risen rapidly since the recession, as many Americans enrolled in school to escape a weak labor market. Also, other funding sources—such as home equity and household savings—diminished after the housing crash, forcing a greater share of students to borrow.
The biggest promoter of education (and student loans): it's not rocket science. But not to worry: sometime over the next decade, the government will solve this problem also. LOL. My advice to those with huge student debt load: pay off just enough to keep out of trouble, but don't let it interfere with your life's plans. It's just a matter of time before the government finds a way to write off that debt for you. It will probably be the issue for the 2020 or 2024 presidential campaign.


Well, this is interesting. Arkansas could scuttle ObamaCare? Maybe I'm misreading the story.  It never quits, does it?
The Arkansas House of Representatives on Tuesday failed to pass legislation to continue a state program that used Medicaid dollars to enroll low-income residents in private health insurance, throwing the future of the nationally watched program into doubt.
Arkansas last fall became the first state to begin offering a "private option" for low-income residents instead of enrolling them in Medicaid—the result of a compromise between state Republicans and Democrats about how to implement a key provision in the Affordable Care Act.
The private option was designed to appeal to conservative lawmakers who wanted to cut the number of uninsured people in the state and use federal dollars to do so, but believed the private sector could provide care more efficiently than Medicaid.
Too confusing for me, but something tells me this is not good. For someone.


The Supreme Court will hear whether EPA has gone too far. Let's hope the court doesn't blow it this time.


The Journal has a long, long article on Obamacare. This is the lede:  
The federal law upended existing health-insurance arrangements for millions of people. Companies worry about the expense of providing new policies, some hospitals aren't seeing the influx of new patients they expected to balance new costs and entrepreneurs say they may hire more part-time workers to avoid offering more coverage.
The law's true impact will play out over years. It will depend in part on whether backers overcome serious early setbacks, including crippling glitches in the new online insurance marketplaces and many states' rejection of the Medicaid expansion. But another obstacle the law faces is pushback from some consumers and industry over the higher costs, complex rules and mandatory requirements it imposes.
There is so much with regard to Obamacare one could devote an entire blog to the subject.  But the concepts and unintended consequences are pretty straightforward. It's not rocket science. The $12,000 annual deductible for a traditional husband-wife couple pretty much says it all. Oh, and the 30-hour work week.

40 hours at $8/hr = $320/week, minimum wage. 30 hours at $10.10 = $303/week, new minimum wage, Obamacare rules. And the employer will cost-shift the employee's health care premium.

It's no wonder that folks working for a minimum wage are panicking: on top of everything else, their hours are going to be cut. Maybe that explains all the interest in the minimum wage all of a sudden.


Wow, this is interesting. Big day for news. Turkey -- a country that a lot of folks would consider pretty modern (considering), and pretty democratic (considering), and pretty progressive (considering) and now this: Turkey, the government, will now restrict web access. The new law will give the president sweeping powers to block websites and monitor user activity....wow. One does not need to read any further.


And this is just the front section today.


GM secures aluminum for trucks. It looks like Government Motors was caught off-guard by their former CEO yesterday when he called faor an acceleration in fuel standards for trucks.
General Motors Co. is accelerating efforts to field a largely aluminum-bodied pickup truck by late 2018, under pressure from federal fuel efficiency standards and archrival Ford Motor Co. according to people familiar with the matter.
The No. 1 U.S. auto maker recently locked-in supply contracts with Alcoa Inc. and Novelis Inc., which are now working to increase their aluminum sheet production to supply the next-generation GM pickup, the people said. Aluminum sheet for automotive bodies is in such high demand that companies need to order it years in advance.he push to develop what the industry calls an "aluminum intensive" large pickup marks an apparent change of direction for GM, which has pursued smaller and lighter weight steel-bodied trucks.
Before Ford's debut last month of its 2015 F-150, with a body made almost entirely of aluminum, GM executives questioned whether such a vehicle could be cost competitive or appealing to U.S. customers.
Instead, GM developed two small pickups, the Chevrolet Colorado and GMC Canyon, to meet rising demand for better fuel economy. Those two vehicles are due to arrive on the market as 2015 models this year.

Assistance for laid-off workers gets downsized.
As unemployment remains stubbornly high, one of the main tools companies use to help some laid-off workers find new jobs is shrinking. Outplacement used to be a way to help upper-level employees—usually managers and above—through a job loss and guide them toward new work. But where companies once paid outside firms for months of face-to-face coaching, job leads, office space and workshops, laid-off workers today get less help.
This caught me by surprise. DOE approves loan guarantees for two new nuclear reactors in Georgia.

The Los Angeles Times

Really? The president will sign an executive order streamlining imports, exports. I wonder if that includes road salt for New Jersey?  Nope, too much to hope for. This is simply an executive order for a website that will operate just like Obamacare. LOL. Too much to hope for. An empty suit. The lede:
President Obama plans to sign an order Wednesday that officials say will cut the waiting time on permits to import and export goods "from days to minutes."

Currently, businesses submit information to dozens of government agencies, often on paper forms, and must then wait for days before moving goods across U.S. borders.
The changes to the International Trade Data System will let businesses send the required information electronically through a single portal before importing or exporting cargo, a White House official said Wednesday morning.‎
Obama's order will direct government agencies to complete work on the new system by December 2016, at the end of his term, the official said.
Yes, this will get mired in bureaucracy; won't happen in my investing lifetime. LOL.

Plan To Meet New England's Energy Needs: 1) Expensive 2) Inadequate -- Need Twice What The Plan Calls For

Regular readers know what RBN Energy has to say about the New England energy debacle -- it will take up to six years to get the infrastructure in place to meet the energy needs of New England. This article confirms what we already know
New England is facing an energy crisis brought on by high natural gas prices, and the call by governors in the six states for a new, publicly funded natural gas pipeline does not go far enough to solve the problem, according to a detailed analysis of the region's energy options.
The 30-page analysis, released on Feb. 11, was conducted by a consulting group, Competitive Energy Services of Portland, Maine, on behalf of the Industrial Energy Consumer Group, which represents large-scale users of electricity in New England.
"The governors' recommended addition of one billion cubic feet of natural gas pipeline capacity will help lower energy prices," according to the analysis, "but will still leave New England paying $600 million more for energy annually than if adequate pipeline capacity existed."
The consultants used 12 months of 2013 data to estimate future trends, and concluded that New England needs two billion cubic feet of new natural gas pipeline capacity — twice what the governors are calling for.
"Since 2012, a fundamental shift toward higher costs due to inadequate gas pipeline capacity has occurred in New England," they wrote.
That first statement -- New England is facing an energy crisis brought on by high natural gas prices -- in bold is a bit of a stretch. New England is NOT facing an energy crisis brought on by high natural gas prices.

I believe it was brought on by high heating oil prices and "everyone" in New England switching from high-priced heating oil to natural gas (coal-produced electricity was not an option; the president had pretty much killed the coal industry). Natural gas is not all that high priced -- less than half what it has been in the past, and a third to a fourth of what Europe and Asia are paying. No, it is not the "high cost of natural gas" that is causing the problem, it is the lack of infrastructure to bring adequate amounts of natural gas to New England in the first place.

Local folks should ask their elected officials how this came about. Obviously the solution is going to be very, very expensive. A lot of industry is going to move elsewhere. It costs a lot to move, but most industry can re-capture their costs over six years, if that's how long it's going to be before New England has adequate supply to meet demand.

A big "thank you" to a reader for sending the link to the article. RBN Energy has been saying the same thing for quite some time.

Eight (8) New Permits -- The Williston Basin, North Dakota, USA; XTO Reports A Huge Well

Active rigs:

Active Rigs18518019917193

Eight (8) new permits -- 
  • Operators: BR (6), QEP, Ballard
  • Fields: Elidah (McKenzie), Grail (McKenzie)
  • Comments: BR permits are for a 6-well pad; Ballard has a permit for a wildcat in Bottineau County (and probably a Spearfish well)
Wells coming off the confidential list this long weekend have been posted; see sidebar at the right. EOG reported some spectacular wells.

In addition, there were eight (8) producing wells completed:
  • 25767, 531, CLR, Pierre 5-21H, Dollar Joe, t12/13; cum 8K 12/13;
  • 25766, 594, CLR, Madison 4-28H1, Dollar Joe, t12/13; cum 6K 12/13;
  • 25765, 848, CLR, Madison 5-28H, Dollar Joe, t12/13; cum 7K 12/13;
  • 25478, 528, CLR, Malcolm 2-20H1, Sauk, t1/14; cum --
  • 25479, 487, CLR, Malcolm 3-20H, Sauk, t2/14; cum --
  • 25480, 261, CLR, Malcolm 4-20H1, Sauk, t2/14; cum --
  • 23875, 662, CLR, Juneau 2-11H,  Brooklyn, t12/13; cum 14K 12/13;
  • 25549, 3,264, EXTO, Marlene 42X-20G, Blue Buttes, t2/14; cum -- 
This is an interesting name change:
  • 26850, QEP, Otis 4-28-33BHR (was Otis 29-32-28-33LL)
For newbies, this is what a "sweet spot" looks like. First, the Elidah oil field:

The cluster of new permitted sites really, really stands out. Now, zoom in on sections 10 and 15:

[The following day, February 19, 2014, BR announced six more permits for this immediate area, including three more Haymaker wells and a Bullrush well.]

The completed wells in this screenshot:
  • 18380, 1,798, BR, Bullrush 24-10H, Elidah, t2/10; cum 235K 12/13;
  • 18798, 3,700, BR, Haymaker 21-15H, Elidah, t9/10; cum 200K 12/13;
  • 25005, 2,913, BR, Bullrush 44-10TFH, Elidah, t6/13; cum 58K 12/13; no pump;

By the way, completely unrelated, here's a screenshot of a sweet spot in Johnson Corner:

These are all three- or four-well pads in Johnson Corner, northeast McKenzie County, near Watford City. These are all Burlington Resources wells, Norman and Denali wells on each of the four pads.

For all the activity (four rigs on four pads), it is interesting that there are not many existing wells in the immediate area.
  • 17680, 463, BR, Denali 31-28H, t2/09; cum 125K 12/13; no pump; 
  • 18225, 625, BR, Norman 1-9H, t1/10; cum 140K 12/13;
  • 18047, 1,620, BR, Teton 21-3H, t9/10; cum 128K 12/13;
Lots of "seed corn" being planted as they say in Iowa.

Off The Net For Awhile: I See Yahoo!Finance Finally Got Their Data Point Correct

WTI is up a whopping 1.6%, solidly above $101/bbl now. [Later, the market closed with oil over 2% -- and "the financial press" connects it with a falling dollar:
  • Mar crude oil rose $2.23 to $102.52/barrel 
    • Crude oil climbed above $102 as the dollar index traded in the red. Prices came off a session low of $101.16 set in early morning pit trade and touched a session high of $102.54 just before settling with a 2.2% gain. Comment: if oil had been trending lower and slipped below $90, I could understand buyers jumping in on a bargain and moving the price up 2%; but when oil has been high-priced for longest stretch ever, for it to go up another 2% certainly seems it has to be more than just related to the dollar. The five-day EURDOL graph has it going from $1.364 to $1.376 -- all of one cent. Hard to see how that accounts for a 2% rise in the price of oil; of course ,the EURDOL trend is the one market watchers are concerned about. This is the low for the dollar for 2014 -- a huge psychological reason for oil to move up, I suppose.]
My thoughts in an unedited e-mail reply to Don with regard to the rise in the price of oil:
The dollar is marginally weaker over two years, but certainly not weaker over the five-year-graph. I suppose a marginally weaker dollar accounts for some, but not all of the $1.00+ rise in price today.

The Mideast is quiet (at least with regard to headlines that CNBC reacts to).

WTI/NYMEX is priced at Cushing and Keystone XL south is draining Cushing, so there's an artificial drop in storage at Cushing -- but analysts should have that factored in by now.

The RBN story, repeated again today, about the mismatch of refineries and light oil, is the only thing that I can figure out that might explain the rise. The additional heavy oil that the refineries would need would come from Venezuela, and we both know that Venezuela is about to implode.
And then later, in another response to the suggestion that nuclear arms race in the Mideast might be a factor:
I honestly don't see a whole lot different in the Mideast today than I did several years ago, except the nuclear arms race. And that will play out for decades. I think the rise in the price of oil today has as much to do with a recovering global economy as anything else; RBN Energy says Europe is short diesel and buying all the diesel, other refined products it can ship from Texas, Louisiana refineries.
Off the net for awhile. It's a beautiful day in the DFW neighborhood; going biking. I see that the Drudge Report is all screwed up at the moment. I thought only bloggers like me made mistakes like that. LOL. [Update, five seconds later: The Drudge Report has "been fixed." Thank goodness.]

Zeits Not Impressed With SandRidge Open Hole Completions In The Mississippi Lime

The link takes you to SeekingAlpha with contributor Richard Zeits, one of the best of the shale analysts. This is a good post to read, bookmark, and save. It's only going to be available for 30 days or so before it's archived.

Some excerpts:
  • the comparison across the three well groups shows that based on production test data, SandRidge's fourth quarter promises to show a recovery from the worrisomely weak third quarter
  • SandRidge conducts its typical 24-hour production test about three weeks after the date of the well's first production date (although the test may occur as early as ten days or as late as two months after the first production). While the majority of the wells are likely to have "cleaned up" by the time of the test, some may still have significant amounts of frac fluids flowing back. Chokes and flow regimes (free flowing vs. gas lift vs. pumping) differ from well to well. As a result, the test rate represents an imperfect and "noisy" indicator of the well's early productivity. Further complicating the story is the high variability of decline profiles exhibited by wells in the Mississippian. The bottom line, the correlation between the well's production test rate (or any IP rate, for that matter) and the EUR is imperfect
  • latest well data indicates that SandRidge is actively experimenting with open hole completions in the Mississippian. The company used open hole completions in ~60% of the sample's wells that came on production in Oklahoma during the November-December period (18 open hole completions of the 31 wells total, using the Q4 sample data)
  • open hole completions in the context of the Mississippian play have attracted significant attention in industry and financial press. There are several valid arguments that make this approach conceptually intriguing as a potential solution for some of the challenges encountered in the Mississippian play. Among the primary benefits quoted is the ability to minimize damage to the fracture-rich carbonate rock from the cementing job. Reduced well cost is another benefit (the approach may be particularly effective in cutting costs in those situations where the log data obtained during drilling indicates poor rock quality and an expensive completion is no longer justified) 
And then this:
However, a detailed review of SandRidge's production test data does not provide clear evidence that the method leads to better well performance.

One Bakken Well Completion Reported Last Week In Montana

From the Fairfield Sun Times:
  • In Richland County, True Oil LLC, Anvick 21-3 3-10H, a Bakken well with three laterals (11,617 feet, 12,807 feet; and, 20,125 feet; IP was 860 BOPD.
  • Sheridan County, Shakespeare Oil Co Inc. reported the completion of the State 1-25, no IP was reported and, a request to abandon has been filed.
Global Warming

I can't count the number of times folks have asked out loud why the winter Olympics were staged in a "warm" location of Russia.

Flashback, special to The New York Times, January 17, 1980:
Lake Placid, NY, January 17 -- In Lake Placed, where there is virtually no snow, everybody talks about the weather, but nobody can surrender to it.
Indeed, the outspoken director of the Lake Placid Chamber of Commerce resigned under fire this week, just days after he said publicly that he doubted the town could stage the 1980 Winter Olympic Games without snow.
Even though a warm, rainy winter has left miles of Olympic ski trails soggy and bare, officials steadfastly maintain that the Games will open here on schedule on February 12.
Members of the lake Placed Olympic Organizing Committee say that, long-range weather forecasts notwithstanding, they fully believe that the springlike thaw will end and that snow will fall in the next three weeks. 
And so it goes.

The problem for the Sochi Winter Olympics and NBC's television ratings is not the snow conditions, but the time zone difference. 

The Bakken Is Different -- But We All Knew That

An excerpt from an article everyone interested in the Bakken should read.

I have reprinted the article in its entirety in case the original link is broken, but have left it in draft form for now, and will post it some months from now.

The original link is here. It begins:
The steady growth of U.S. oil and gas production in recent years has come from a number of shale formations across the country. But not every region is seeing the same growth in economic activity from the energy boom cracked open by horizontal drilling and hydraulic fracturing technology.

The Bakken and emerging Three Forks formations in North Dakota and eastern Montana stand out from other shale areas for a host of reasons. For starters, the formations have a large amount of relatively more profitable oil reserves, as opposed to gas reserves. The Bakken region also had a moderately small preboom population and workforce and little oil and gas infrastructure. As oil drilling and production increased, it generated a high fraction of well-paid employment in oil- and gas-related activities compared with other shale areas, thus helping to drive unemployment rates down and average wages up.

The Bakken Is Different -- But Then We All Knew That; February 18, 2014

Reprinted in its entirety in case the original link is broken. The original link is here.
The steady growth of U.S. oil and gas production in recent years has come from a number of shale formations across the country. But not every region is seeing the same growth in economic activity from the energy boom cracked open by horizontal drilling and hydraulic fracturing technology.

The Bakken and emerging Three Forks formations in North Dakota and eastern Montana stand out from other shale areas for a host of reasons. For starters, the formations have a large amount of relatively more profitable oil reserves, as opposed to gas reserves. The Bakken region also had a moderately small preboom population and workforce and little oil and gas infrastructure. As oil drilling and production increased, it generated a high fraction of well-paid employment in oil- and gas-related activities compared with other shale areas, thus helping to drive unemployment rates down and average wages up.

Start with what’s underground. In terms of total energy oil and gas content, the Bakken ranks about in the middle (see oil and gas shale area profiles for details). But the mix of that energy content is crucial. The Bakken has more recoverable oil than other shale formations (see table) and less natural gas and natural gas liquids, based on U.S. Geological Survey (USGS) estimates. That matters because oil prices have remained historically high since 2009, while natural gas prices have dipped, making oil relatively more profitable than natural gas and leading to greater increases in drilling and production compared with other regions.

Chart 1 illustrates the strong growth in active drilling rigs in North Dakota relative to other states with shale formations. Pennsylvania showed the next strongest growth in rigs, which started in 2009 with drilling in the Marcellus formation, but softened in 2012 as the price of natural gas remained low.

North Dakota drilling growth faster than other shale states

The increase in drilling activity in the Bakken has led to robust growth in oil and natural gas production. North Dakota’s oil production increased about 10-fold since 2001, and the state is now the second largest oil producer in the United States after Texas. In terms of gas production, Texas remains the leader, though both Pennsylvania and Arkansas posted solid growth in natural gas production.

Of course, one reason for the Bakken’s high growth in oil production is the relative scarcity of preboom activity. In 2004, North Dakota had an average of 15 active oil-drilling rigs operating in the state. By 2012, the state had over 180 active rigs.

In contrast, Texas already had a mature oil and gas industry prior to the horizontal drilling and hydraulic fracturing boom. In 2004, the state had 500 rigs in operation, which increased to 900 rigs by 2012. Much of the infrastructure necessary for this growth utilized infrastructure already in place for conventional oil and gas activities nearby and in the Barnett, Eagle Ford and Permian Basin formations.

Also, unlike states such as Texas and Oklahoma with established oil and gas activity, North Dakota and Montana started from a small oil and gas infrastructure base. In concert with the increase in drilling rigs, North Dakota and Montana had to build new pipelines, rail facilities, roads and municipal infrastructure in sparsely populated areas. The Bakken boom led to strong gains not only in oil field jobs, but also in construction, trucking and service jobs.

North Dakota also had the greatest percentage change in total employment across all sectors relative to shale counties in other states. Average employment in North Dakota shale counties almost tripled from about 3,000 in 2001 to 8,500 in 2012. Job growth in other shale areas was below 40 percent. Despite this strong growth, the average employment in shale counties in North Dakota remains smaller than the average employment in shale counties in most other shale areas.

A much larger share of Bakken employment has been in natural resources and mining than in other shale areas. In 2012, just over a quarter of all workers in North Dakota’s shale counties were employed in this sector, most of them in oil and gas, which pays about three times the national average weekly wage. In comparison, the mining and natural resources employment share in other shale areas was about 5 percent.

As demand for labor picked up in the Bakken, the August 2013 unemployment rate dropped to 1.2 percent and 3.8 percent, respectively, in the North Dakota and Montana portions of the Bakken. While unemployment rates fell in other shale areas, none dropped as low as in the Bakken. In a few areas, such as Pennsylvania, Arkansas and Louisiana, unemployment rates didn’t drop as much as the national unemployment rate dropped since 2009.

As labor markets tightened in the Bakken and relatively high-paying oilfield jobs grabbed a larger share of workers, average weekly earnings rose steeply compared with the national average and the average in other shale areas. In fourth quarter 2012, average weekly wages across all sectors reached $1,300 in the shale areas of North Dakota, higher than the national average of $950 and much higher than in other shale areas.

In fact, other than in Montana and somewhat in Pennsylvania, average weekly wages in other shale areas didn’t manage to close much of the wage gap with the national average. This is because oil shale regions tend to be more rural (where wages are lower), and the share of jobs in the high-paying oil and gas sector remained low.

Comparing Bakken with Eagle Ford

While the Bakken has received much attention from news media and other observers of the oil and gas sector, the Eagle Ford formation in Texas has also caught plenty of interest. Unlike many other shale areas that have relatively high concentrations of natural gas, the Bakken and Eagle Ford formations both have relatively large oil prospects. How do these two areas compare in terms of oil production and economic activity?

While the USGS estimates a relatively modest reserve of oil in the Eagle Ford formation, the Energy Information Administration expects as much as 6 billion barrels of oil production from the Eagle Ford from 2012 through 2040 compared with over 8 billion barrels from the Bakken. According to the Railroad Commission of Texas, in the first half of 2013, Eagle Ford’s oil production averaged about 600,000 barrels per day. In comparison, the Bakken’s oil production as of June 2013 exceeded 800,000 barrels per day.

Despite similar oil production levels and promising prospects, from January 2008 to March 2013, the Bakken (including North Dakota and Montana counties) has seen more job growth than the Eagle Ford (47,000 versus 21,000) and a stronger rate of job growth (112 percent compared with 9 percent). The Bakken also enjoyed a lower unemployment rate (1.6 percent versus 6.5 percent as of August 2013) and a higher share of jobs in the natural resources and mining industry than the Eagle Ford (27 percent versus 7 percent). This advantage helped boost average wages in the Bakken. Average weekly wages since first quarter 2008 increased by $590 (88 percent) in the Bakken compared with $115 (20 percent) in the Eagle Ford.

Finally, and probably not surprisingly, there are distinct contrasts between the Bakken and the rest of North Dakota and Montana in employment growth, unemployment rates and average weekly wages. For example, the unemployment rate in the Bakken has dropped lower than the rate in the rest of North Dakota and much lower than the rate in the rest of Montana.

Similar comparisons are available in the accompanying appendix for shale areas in other states. In most instances, the unemployment rate and average weekly wages in these shale counties move in a pattern similar to the rest of the counties in their states. While employment growth in the shale areas tends to be stronger than in the rest of their states, the difference in growth between the shale areas and the rest of their states is smaller than in the Bakken. Not only does the Bakken have better economic performance than other shale areas, its economic performance stands out in sharper contrast with the rest of its states’ counties than other shale areas. (For production and geologic profiles of shale areas in this comparison, see appendix article at http://www.minneapolisfed.org/pubs/fedgaz/14-01/shale_oil_appendix.pdf.)

Data collection and analysis methods

References to the Bakken area include the Three Forks formation, which in large part is just underneath the Bakken formation. The Minneapolis Fed defines the Bakken area as nine counties in western North Dakota and three counties in Montana using quantitative and qualitative criteria.

This fedgazette analysis uses the general approach of Erik Gilje (Boston College) in his 2012 working paper “Does Local Access to Finance Matter? Evidence from U.S. Oil and Natural Gas Shale Booms” to identify shale counties. A county is considered a “shale county” when the area had at least 100 horizontal wells in 2011. Almost all the Bakken counties have over 100 horizontal wells; therefore, 100 is used as a benchmark for selecting counties in other shale areas. Virtually all the counties are within the boundaries of current “shale plays” as mapped by the Energy Information Administration. Using this definition, shale counties as a percentage of total counties in each state range from about 5 percent to 17 percent.

Number of shale oil counties in each state

Arkansas    5 out of 75

Louisiana    6 out of 64

Montana     3 out of 56

North Dakota    9 out of 53

Oklahoma    9 out of 77

Pennsylvania    6 out of 67

Texas    31 out of 254

Total                  69 out of 701

In making the Bakken versus Eagle Ford comparison, the Railroad Commission of Texas’ demarcation of Eagle Ford—24 counties in the southern part of the state—is used to define the Eagle Ford area, not horizontal well data.


The February 15, 2015, issue of the Economist had a very, very long article on "Saudi America." Because the article could be lost to archives, I have re-printed the entire article here.

Saudi Arabia

DENNIS LITHGOW is an oil man, but sees himself as a manufacturer. His factory is a vast expanse of brushland in west Texas. His assembly line is hundreds of brightly painted oil pumps spaced out like a city grid, interspersed with identical clusters of tanks for storage and separation. Through the windscreen of his truck he points out two massive drilling rigs on the horizon and a third about to be erected. Less than 90 days after they punch through the earth, oil will start to flow.

What if they’re dry? “We don’t drill dry holes here,” says Mr Lithgow, an executive for Pioneer Natural Resources, a Texan oil firm. In the conventional oil business, the riskiest thing is finding the stuff. The “tight oil” business, by contrast, is about deposits people have known about for decades but previously could not extract economically.

Pioneer’s ranch sits at the centre of the Permian Basin, a prehistoric sea that, along with Eagle Ford in south Texas and North Dakota’s Bakken, are the biggest sources of tight oil, a broad category for the dense rocks, such as shale, that usually sit beneath the reservoirs that contain conventional oil. Since 2008 tight-oil production in America has soared from 600,000 to 3.5m barrels per day (see chart 1). Thanks to tight oil and natural gas from shale, fossil fuels are contributing ever more to economic growth: 0.3 points last year alone, according to J.P. Morgan, and 0.1 to 0.2 a year to the end of 2020, according to the Peterson Institute, a think-tank. Upscale furniture stores and luxury-car dealerships have sprung up in Midland since the boom began. Mr Lithgow has truck drivers who earn $80,000 a year. Local oil-service firms have been known to hire fast-food workers on the spot. In all, the unconventional-energy boom will create up to 1.7m new jobs by 2020, predicts McKinsey, a consultancy.

And that is only part of the story. Another benefit of tight oil is that it is much more responsive to world prices. Some economists think this could turn America into a swing producer, helping to moderate the booms and busts of the global market.

Pioneer is rapidly boosting production. But Scott Sheffield, the company’s boss, worries that in a few years he will run out of customers; America has prohibited the export of crude oil since the 1970s. At $100 a barrel, the price of West Texas Intermediate (the most popular benchmark for American oil) is comfortably above the break-even cost of tight oil. But the prospect of a glut has futures pricing it at $20 less in 2018. “There will be a lot less oil-drilling when you take $20 out of everybody’s margin,” says Mr Sheffield.

Until the early 1970s, America was the world’s largest oil producer and the Texas Railroad Commission stabilised world prices by dictating how much the state’s producers could pump. When Arab states slapped an oil embargo on Israel’s Western allies after the six-day war in 1967, Texas cushioned the blow by allowing a massive production boost.
But rising consumption and declining production eroded the state’s spare capacity, and in March 1972 Texas called for flat-out production. “This is a damn historic occasion and a sad occasion,” the Texas Railroad Commission’s chairman declared. When Arab producers imposed another embargo the next year, prices rocketed. America had lost the role of world price arbiter to OPEC, a cartel dominated by despotic regimes. American politicians tried desperately to curb consumption (for example, by lowering speed limits) and to conserve supplies (by banning crude-oil exports in 1975).

American production declined steadily from a peak of 9.6m barrels a day in 1970 to under 5m in 2008. About then, independent producers began adapting the new technologies of hydraulic fracturing (“fracking”) and horizontal drilling, first used to tap shale gas, to oil. Total American production has since risen to 7.4m barrels a day, and the Energy Information Administration, a federal monitor, reckons it will return to its 1970 record by 2019. The International Energy Agency is more bullish; it reckons that by 2020 America will have displaced Saudi Arabia as the world’s biggest producer, pumping 11.6m barrels a day.
Besides directly creating new jobs and income, the fossil-fuels boom could help growth by reducing America’s vulnerability to oil-price swings, in two ways. First, as production rises and imports shrink, more of the cash that leaves consumers’ pockets when the oil price rises will return to American rather than foreign producers. David Woo of Bank of America/Merrill Lynch notes that America’s petroleum deficit has narrowed to 1.7% of GDP while Europe’s has widened to nearly 4%, which seems to have made both the dollar and the economy less sensitive to oil prices.

The second channel lies in the economics of shale. Oil flows relatively easily through the porous rocks that make up a conventional reservoir, so a conventional well can tap a large area. As a result, the volume of oil pumped each day declines slowly, on average at 6% per year. By contrast, oil flows much more sluggishly through impermeable tight rock. A well will tap a much smaller area and production declines quite rapidly, typically by 30% a year for the first few years (see chart 2). 

Maintaining a field’s production levels means constant drilling. The International Energy Agency reckons maintaining production at 1m barrels per day in the Bakken requires 2,500 new wells a year; a large conventional field in southern Iraq needs just 60.

This all means that when oil prices rise, producers can quickly drill more holes and ramp up supply. When prices fall, they simply stop drilling, and production soon declines. In early 2009, after prices collapsed with the global financial crisis, Pioneer shut down all its drilling in the Permian Basin. Within six months, output in the affected areas dropped by 13%.

Bob McNally of Rapidan Group, an industry consultant, predicts that America could be “force-marched” back to the stabilising role it played in the 1960s, this time responding to the market’s invisible hand rather than government diktat. Will that work in practice? It may already have done so. Since 2008, the Peterson Institute notes, turmoil in Sudan, sanctions on Iran and declining North Sea output have taken a lot of oil off the market. Without America, which accounted for half of the growth in global output over that period, Persian Gulf producers might not have been able to make up for the loss. Prices could have risen sharply, hurting consumers everywhere. Yet they did not.

Oil firms try not to over-react to short-term price fluctuations, of course. Capital, equipment and labour all cost money, so they try to ramp up production only in response to what they think will be long-term shifts in the oil price.

The ban on crude-oil exports hurts producers and makes it harder for America to become a swing supplier. Light, sweet (ie, low-sulphur) West Texas Intermediate already trades at a discount of $8 to Brent, its global peer. That is due mostly to transport and storage bottlenecks in America, but increasingly the export ban makes a difference. In recent decades American refiners have reconfigured themselves to handle the heavier, sour oil imported from Mexico, Venezuela and Canada’s tar sands, leaving them with less capacity for refining tight oil, which is light and sweet.

The oil price at which shale producers break even ranges from $60 in the Bakken to $80 in Eagle Ford, reckons Michael Cohen of Barclays, a bank. If exports yielded an extra $1 to $1.30 a barrel, he estimates that might raise total output by as much as 200,000 barrels per day.

f the ban were lifted, crude-oil exports could start more or less straight away. The necessary pipes and tankers are mostly there already. But the political debate is only in its infancy. By law the president can allow exports he considers in the national interest. Barack Obama has yet to express a view on the ban. Legislators from non-oil-producing states are wary. “For me the litmus test is how middle-class families will be affected,” says Ron Wyden, the Democratic chairman of the Senate energy and natural resources committee.

The main beneficiaries of the ban are the refiners. They buy light, sweet American crude for less than the global price, turn it into petrol and then sell that at the global price. Exports of refined petroleum products are not banned, and have, unsurprisingly, soared.

Defenders of the ban (including, naturally, some refiners) claim that if America exported more oil, Saudi Arabia would reduce its own output. Prices to American consumers would not fall, they say, and might even rise. Historical evidence says otherwise, however. When Congress allowed Alaska to export crude oil in 1995, its west-coast customers did not pay any more for petrol, diesel or jet fuel.

Oil producers would obviously benefit from lifting the ban. So might other Americans, in less obvious ways. A global oil market that fully included America would be more stable, more diversified and less dependent on OPEC or Russia. The geopolitical dividends could be hefty. As Pioneer’s Mr Sheffield notes, “It’s hard to believe we’re asking the Japanese to stop taking Iranian crude, but we won’t ship them any crude ourselves.”

Correction: We said above that higher export prices could raise output by as much as 200,000 barrels per year. We meant per day. Sorry. This has been corrected.

What's Wrong With This Picture?

MyFoxNY is reporting:
The salt shortage persists in New Jersey. Officials have failed to get permission for a barge with 40 tons of salt to set sail for the tristate region.
N.J. officials were hoping a barge with 40 tons of salt would arrive from Maine.  But the vessel wasn't flying the American flag and officials couldn't get clearance from Homeland Security to come to the Port of Newark.
The problem is because of the 1920 federal Maritime Act. It prevents foreign vessels from moving cargo from one U.S. port to another. It was designed to protect the U.S. shipping industry from foreign competition.
The barge sailed empty, leaving the salt in Maine
Now municipalities are counting on smaller shipments from suppliers.  Jersey City Mayor Steve Fulop says he's been waiting for salt for two weeks.
A presidential executive order could make a one-time exception. This is quite incredible. I guess this is the way the president shows his "thanks" to a governor who supports him. 

The salt can be trucked from Maine to Jersey City. This is not rocket science. They can salt the roads on the way down.

[Later, a reader noted:  
If Homeland Security is involved with something as simple as shipping two semi-trucks of road salt form Maine to New Jersey, what else and how deep is Homeland Security stuck in every fabric of US life? 

The activist environmentalists should be livid: think of the carbon footprint that barge left, all for naught. How much is Homeland Security impeding commerce and the hiring of people. I suppose the EPA and Homeland Security working in concert could shut down the entire US just "doing their business."]

Three More Incredible EOG Wells In The Bakken, The Williston Basin, North Dakota, USA; One Well With 160K In Less Than Five Months

20643, 1,816, EOG, Van Hook 104-1218H, Parshall, t11/13; cum 51K 12/13;
25056, 1,815, EOG, Van Hook 33-1218H, Parshall, t11/13; cum 54K 12/13;
25093, 745, EOG, Wayzetta 150-1509H, t8/13; Parshall, cum 158K 12/13;

A Note to the Granddaughters 

I mentioned earlier that I completed The Girl With The Dragon Tattoo. I'm now in my Great Gatsby phase, which I imagine will last a few days, maybe a week or so. Some years ago I was in my F. Scott Fitzgerald - Zelda Fitzgerald phase, having read several biographies of both.

I don't recall reading anything by Fitzgerald other than The Great Gatsby but I have a poor memory. The dots that led me here/there started with Lana Del Rey (why? I don't recall) which led me to the 2013 movie. 

For whatever reason, I was curious about the location of the "valley of ashes." Two internet links provided the information I was looking for, both by the same individual:
In a different life, long ago, and far away, I spent a lifetime in a suburb of New York City one summer. I was on the west side of New York City and never had the "opportunity" to visit the east side, or Long Island, or Queens.
From wiki: 
Queens is the easternmost of the five boroughs of New York City, the largest in area, and the second-largest in population. The borough of Queens has been coterminous with Queens County since 1899. The county is now the second most populous county in New York State (behind neighboring Kings County [the borough of Brooklyn]), as well as the fourth-most densely populated county in the United States.
Queens (and Brooklyn) sit on the west end of geographic Long Island. Queens is the most ethnically diverse urban area in the world with a population of over 2.2 million, 48% of whom are foreign-born, representing over 100 different nations and speaking over 138 different languages. If each New York City borough were an independent city, Queens would be America's fourth most populous city, after Los Angeles, Chicago, and Brooklyn. Queens has the second-largest and most diversified economy of all the five boroughs of New York City.
At the time, I was working seven days a week in Union County, New Jersey, and had little opportunity to see New York City. I remember vaguely, one Saturday spending the day in and around Grand Central Station, but that was it. The last day I was in the area, Mrs Fisher drove me to the airport (JFK?) to fly back home, or at least as far as Minneapolis, where I caught the train and railed back to Williston. 

That was my "summer of '42" but for me it was 1971. Some of the top twenty songs in 1971:
1. Joy to the World, Three Dog Night 
2. Maggie May / Find a Reason to Believe, Rod Stewart 
3. It's Too Late / I Feel the Earth Move, Carole King 
5. How Can You Mend a Broken Heart?, The Bee Gees 
6. Indian Reservation, The Raiders 
8. Take Me Home, Country Roads, John Denver 
11. Me and Bobby McGee, Janis Joplin 
14. Smiling Faces Sometimes, The Undisputed Truth 
15. Treat Her Like a Lady, Cornelius Brothers and Sister Rose 
17. Mr. Big Stuff, Jean Knight 
20. The Night They Drove Old Dixie Down, Joan Baez 
The summer of 1971 was incredibly challenging for me, perhaps the most difficult summer of my life. Take Me Home, Country Roads became my personal anthem. I never cared for John Denver, except perhaps for that song. Treat Her Like a Lady is perhaps the most memorable. And, of course, #17 above, was the great J. Gatsby himself, I suppose.

I met the "first" love of my life that summer. She did not know that (that she would be the "first" love of my life). But I knew it. We spent less than 120 minutes together, total, over the entire summer. The longest might have been a 10-minute conversation at a garden party. Regular readers know that she passed away some years ago. Willie Nelson would understand.

It's those memories that make The Great Gatsby so personal. 

I don't know why "they" require high school students to read books like The Great Gatsby. High school students are neither ready nor prepared for the novella. The book should come with a warning label, "Dangerous to one's mental health."


Young and Beautiful, Lana Del Rey

For Investors Only

Seventeen (17) companies announce increased dividends or distributions, including: Cisco Systems, Molson Coors, OXY, UPS.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or think you may have read here.

Early trading:
KOG is already trading at a new high. MDU starts off at a new high.

CVX, COP, XOM all trending up; CVX doing the best of the three, but it had fallen back quite a bit.

UNP down a bit, but trading near all-time highs.

SRE moving up.
Wow, oil is up $1.06, solidly over $101. Since I don't watch CNBC I don't know what the talking heads are telling us about the price of oil. My hunch is that CNBC hasn't said a thing, except Joe Kernen, perhaps, in passing. Sorkin has no interest, and the producers need 72 hours to put together a story. I've posted my thoughts earlier which might explain the rise in oil.


Mid-day trading: the market is flat, but the number of companies trading at new highs is staggering, including CAH, CAT, DIS, ERF, MDU, XLNX.

CLR's Atlanta Pad Southwest Of Williston Should Be Reporting Soon

I posted the link to this story earlier, but for a different reason. This post is to remind folks that CLR's 14-well Atlanta pad in Baker field, southwest of Williston is about read to report.

The Minot Daily News is reporting:
Continental Resources' Atlanta Pad near Williston is permitted for drilling 14 wells on the single pad.
"Four should be producing by early next week," said Mary Ann Osko, director of Public Relations for Continental Resources in Oklahoma City, on Feb. 6. "Ten more are still being completed and should be producing in the near future."
Earlier posts regarding this pad:

Pad Drilling In The Bakken

The Minot Daily News is reporting: (the story was sent to my two readers, thank you)
In 2013, two thirds of the permits issued for drilling wells in the oil patch were for multi-pads, said Alison Ritter, public information officer for the North Dakota Department of Mineral Resources in Bismarck.
The majority of operators in the Bakken are drilling multi-wells on a single pad, Ritter said. "The average number is four on a pad."
But a pad could have eight to 20, she said.
Rory Nelson, of Williston, was named North Dakota's energy impact coordinator last year. Nelson told members of the Minot Area Chamber of Commerce's Energy Committee at a meeting in Minot recently, that by drilling multi wells on a pad more of the formation can be drilled and more oil can be recovered. "It actually makes the infrastructure a little bit easier," he added.
Although pad drilling is being done by most of the Bakken operators, there are some fields with single wells drilled, Ritter said.
Continental was one of the first companies to drill multi-wells on a single pad. The company completed its first multi-wells on a single pad called ECO-Pad in 2010 in Dunn County (four wells from a single drilling pad) from the Three Forks and Middle Bakken Formations of the North Dakota Bakken, according to the company website.
Several story lines follow from that:
  • one rig on a pad drilling 20 wells, could take two years to complete; mini-manufacturing site
  • two 20-well pads back-to-back (across the road from each other), one rig for both pads: 4 years
  • 40 wells x $7 million = $300 million just to drill, complete
  • the speed with which operators moved to multi-well pad drilling has been nothing short of phenomenal
  • twenty horizontal wells in close proximity leads one to consider different completion techniques
  • might operators be able to frack every other horizontal and get about the same production? or frack every third horizontal? come back and frack others later? 
One might get some insight into where completion techniques are headed with Mike Filloon's article over at SeekingAlpha

The Light Crude Oil - Refinery Need For Heavy Oil Continues -- RBN Energy

Active rigs:

Active Rigs18518019917193

RBN Energy:
Natural gas production in the Lower 48 has surged 40 percent since 2005 – hitting record levels in recent months in spite of low prices and a drilling migration away from dry gas to liquids plays. Following a similar trajectory, natural gas liquids (NGLs) output from gas processing plants jumped 40 percent since 2009 as drilling for wet (high BTU) gas accelerated. Crude oil production from shale did not take off until the end of 2011 but since then has surged an astronomical 56 percent to 7.8 MMb/d. While this winter’s harsh weather has placed a temporary slow down on these skyrocketing production numbers, RBN fully expects the growth trend to continue - putting the U.S. within sight of energy independence in the not too distant future.

As a result of new pipeline capacity and rail deliveries, a crude surplus is now building at the Gulf Coast – the biggest refining center in the US. That surplus is complicated by two factors in particular. The first is a mismatch between refinery configuration biased toward heavy crude processing and new supplies that are predominantly light crude. The second is a Federal ban on crude exports except to Canada. The refinery mismatch is putting downward pressure on prices for light sweet crude at the Gulf Coast that many refiners are not able to process without modifications to their configurations. The export regulations are not helping because they prevent excess supplies of light crude and condensate from finding a home in international markets.
A related industry challenge that we have followed closely is that of processing very light crude condensate being produced in increasing volumes in shale basins such as the South Texas Eagle Ford. A number of new build condensate splitters are under construction and planned to process condensate supplies that are a poor fit for Gulf Coast refineries.
In the absence of crude exports, regional refiners are processing the glut of domestic crude headed to the Gulf Coast into refined products for export. That’s in large part because US domestic markets for refined products like gasoline and diesel are flat at best while demand for these products is growing in Latin America, Europe and Asia. Blessed with cheap natural gas fuel supplies and low price domestic crudes, Gulf Coast refiners have become the marginal refined product suppliers to the world and this trend will continue.
The Wall Street Journal

When President Obama killed the Keystone XL 2.0 North, he screwed up plans for a lot of folks. A similar thing, but for different reasons, is affecting shippers with the problems associated with widening the Panama Canal. This is incredibly bad news for shippers; someone is going to take a huge loss:
Shipbuilders are cranking out ever-bigger container vessels and the world's major ports are dredging deeper, all on account of an ambitious multibillion-dollar project to widen the Panama Canal—an endeavor currently stalled by a contract dispute.
More than just the canal is tangled up in the acrimonious battle between Panama and the builders over $1.6 billion in cost overruns.
"There are many cities, countries and port authorities who are spending billions of dollars in anticipation of the traffic that will come from that newly expanded canal," said Adam Putnam, Florida's commissioner of agriculture.
"So, there will be an impact if there is an extended delay." The dispute so far has halted construction for two weeks and now threatens to delay the project by at least three years beyond the proposed completion date of December 2015. Negotiators say they are hopeful of a settlement as soon as Tuesday.
Lamborghini looks to expand. I'm only posting this because of the I-98 series. 

This was reported on the blog over the weekend; it's a huge story in today's WSJ. Chinese jewelry company buys US oil and gas company.

Is it a health-law rewrite or a legitimate delay? And when thinking about that, just remember, the Vietnam "war" was green-lighted with an executive order and a congressional resolution.

Don't look now, but investors have pushed the S&P 500 stock index back almost to a new record. The most ridiculous link I saw yesterday was the DrudgeReport link suggesting George Soros had bet against the market. When you got to the link, it turned out to be somewhat misleading. The link, that is. Drudge has his place, but he risks losing his credibility. Actually, the financial analyst commenting on George Soros' so-called bet against the US stock market told me all I need to know about financial analysts who blog. That's why this is not an investment site.

The Los Angeles Times